How Early is Too Early?

[Sheryl]

Originally Posted by Martha

Bbuzard, welcome to the forum and its grand debates. I am with those who distrust a 4% withdrawl rate when you are relying entirely on your investments to pay for your retirement and you have no retiree benefits.

Ok, so:* Is there anyone here who has actually practiced taking a consistent 4% withdrawal for any number of years?

If you have other income/insurance/pensions on top of the 4% that doesn't seem relevant to me, but if you have those things and so are drawing less than 4%, it would be interesting to know what you actually are withdrawing.

[cute fuzzy bunny]

Noting that I quit at 39 with the same bucket of worry. Trust me, the biggest worry you're going to have is finding your ER'ed days full of stuff to do and wondering how you'd ever fit a 40 hour a week job back into it. And your savings on hair restoration products and anti ulcer medications.

As far as practicing a 4% swr, not me. I did the couple of days of SWR analysis and found that every set of numbers I ran turned up fairly positive results, that I could live on the "safe" withdrawal.

This was after three years of being ER'ed and never hearing about "safe" withdrawals. I just practiced a method of taking interest and dividends and looking for enough growth to offset average inflation, and if I was making a bunch of bucks I didnt feel bad about buying a big ticket item or two that year.

Its all going to be different for everybody as far as how much they think they need, how comfortable they are with their pot and withdrawals, how far they're willing to reel in the spending in bad years, etc.

With no debt, a good income from my wife that we really dont need, more interest and dividends coming in than we're spending even while living a good upper end of the middle class lifestyle and clicking off better than 10% a year returns through an up and down five year period...I feel fine.

Should things turn badly in the markets/economy for a long period, without a debt load to worry about and with a reasonable set of expenses, we could cut our costs substantially and still live pretty well. We could get by on 12-15k a year for several years and we can get to that level without any cutting near the bone. I can make 15k a year selling cars a couple of days a week if I had to. I also know that my brains didnt fall out of my head when I quit working, so even if I had to go back to it full time 10 years from now, while I might have to take an entry level job to "re-prove" myself and it might take 2-3 years to get back to my old pay level...even an entry level job pays more than I'd need to pay the bills.

So I think the keys to an early-early-early-retirement are to have a life worth more to you than the work world is, and if you have a family theres more than enough there to eat up your time...have a cushion that with all of the rationalization and analysis shows you can do it...keep your investment exposure and risk to levels that you can manage without going too far in either direction.

As far as withdrawal rate, I dont have any idea. I'm taking what I want/need and my pot is growing faster than inflation. Thats MY safe withdrawal rate.

Edit: two more things strike me, off the SWR thing. I've seen a few people ER and then go back to work. To me they looked like they identified themselves so closely with their jobs that they couldnt find an identity without it. Or they were like Nicholson in "about schmidt". They really had no life outside of their work world and didnt realize it until they quit. I think both might be symptoms of something the prospective early retiree wants to consider and figure out how to fix whether they quit working or not.

[Sheryl]

Originally Posted by ()

As far as withdrawal rate, I dont have any idea.* I'm taking what I want/need and my pot is growing faster than inflation.* Thats MY safe withdrawal rate.

This makes a lot of sense to me, and is what I will probably do, too.

[Jay_Gatsby]

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

[cute fuzzy bunny]

As in my later edit to my last post, yes. And something that should be considered whether he retires or not.

[Spanky]

Originally Posted by Jay_Gatsby

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

I tend to agree that money is not the issue. He needs to have plan in place to identify life after work.

[Martha]

Well, I think money is a big issue for the OP. The OP seems to have lots of stuff he enjoys doing but appears unsure if he has enough to retire safely. Well, nothing is ever absolutely safe. All we can do is look at history for guidance, hence the talk about historically safe withdrawl rates.

Run some calculators, like FIREcalc. http://www.fireseeker.com/ Put some fluff in your budget that you can cut out if times are tough. If it looks like enough and you want to retire, retire.

[Nords]

Originally Posted by Sheryl

Ok, so:* Is there anyone here who has actually practiced taking a consistent 4% withdrawal for any number of years?

FIRECALC has been doing it for at least 75 years!* ESRBob also spent a lot of time & effort (and probably a good bit of money) doing a similar analysis for the book.

Our personal SWR has been clocking in at 2-3%, partly a function of whether spouse is working or not, but financial issues are in the minority.* Over the last three-plus years our SWR has largely been a function of a bunch of mortgage refinancings, a kid who's switched from dressage to martial arts, and a new passion for surfing & home improvement.* In other words our spending has dropped as a side effect of other lifestyle choices, not by the dictates of SWR.

It's worth critically examining a 4% SWR to avoid being blissfully ignorant, but there's no tool better than the ones we're already using.* I think that it's far more significant (perhaps even "life-saving") to consider the health effects of continuing full-time work AFTER you've achieved a 4% SWR.* If you're made to work or if your ego is wrapped up in having your employees validate your existence, then by all means keep bolstering my Social Security benefits.*

But if you have any possible expectation of being able to develop a life outside of the workplace, then stop fretting about a 4% SWR and pay attention to Martha's work experience.* Her part-time routine has been an eye-opener on how quickly your leisure time can destroy any remaining "pleasure" in showing up at the workplace.* Perhaps your body and your subconscious are trying to teach you something!*

I think it would be sad-- perhaps even life-threatening-- if fears over a 4% SWR kept you in the workplace instead of giving you the courage to start a new & better phase of your life.

[yakers]

One thing for the OP and other young retirees interested in a SWR (safe withdrawal rate) is have a look at that part of ESRbob's "Work Less, Live More". He really explores the issue (much better than another unnamed poster who thinks valuation is everything) and that would be more important for someone retiring in their 40s than for someone with a late retirement and for someone living off their savings & investments rather than a pension. His focus is on asset allocation as a critical element. Its a bit less relevant to folks like me who expect to retire at the old age of 57 or 58 with a COLAd pension,medical coverage and some low cost index funds.
And his general take on taxes is good, if you retire you will probably pay less tax than when you were working. .

[bbuzzard]

Originally Posted by LOL!

That written, what we are doing is slacking off and practicing retirement even though we continue to work. We no longer bank our vacations ... we take family vacations to spend all those weeks of vacations. We get to work around 9 am, leave around 4:30 pm or earlier. Take longer lunch hours to play basketball or whatever. We coach our kids sports teams which is 8 to 12 hours a week. We visit relatives on a whim ... take 4 day weekends. It's true that while the kids are in school you are kind of stuck, but that's only when everyone wants to go somewhere together. You can travel by yourself. My spouse has gone sea-kayaking with her friends while I stayed home. I've gone on manly-man vacations with friends while everyone else stayed home.

I have taken a similiar approach to date, which is part of why I like my job. I bill fewer hours than any other partner in the firm, and feel free to come and go as I like (within reason). I take all my vacation, although it was noted at one point (before I became a partner) that "no partner in the firm would actually take 4 weeks vacation." I have been open and honest with my peers about my work ethic/plan. When I was offered this position, I noted that I was a 40 hour a week man except in unusual circumstances. Fortunately, I have some unusual skills, and almost everyone seems to be happy with my work performance.

[bbuzzard]

Originally Posted by WhodaThunkit

Mr. Buzzard -- You are 41 years old. I may well be wrong, but it seems to me that the 4% WD rate rule-of-thumb is really pushing things for a retirement that could last for 50-60 years.

This does worry me somewhat, and is part of the reason for considering delaying retirement another 8 years.

[bbuzzard]

Originally Posted by Sparky

I see every day in the obituaries about somebody 48 years old dropping dead - don't want that to be me.

My wife's mother died young (48), about 2 years before planned retirement. This has been a signficant factor in our desire for RE.

[bbuzzard]

Originally Posted by Martha

Bbuzard, welcome to the forum and its grand debates. I am with those who distrust a 4% withdrawl rate when you are relying entirely on your investments to pay for your retirement and you have no retiree benefits.

This has also been a concern. I would have zero benefits until receiving SS. We are self-funded for everything.

[bbuzzard]

Originally Posted by nellieb

How about working a few hours a week auditing lawyers bills. Might be refreshing to be on the other side of the table and pick up some income.

Actually, I am an engineer. Since most of the jobs I work on are time & material, my practice is essentially very similiar to a law firm from a business standpoint.

I have considered cutting the hours by opening a one person consulting practice (which I am certain would be successful), but my wife has nixed this due to liability concerns. I must admit that engineering is a high liability profession.

[azanon]

Another vote for 4% at 41 is too risky.* At that age, i'd have twice the amount i thought i needed before i pulled the trigger.

For those that have already done so under a similar calculation, good luck*

Nords, despite there being a debate on this at other places, I think he was just looking for advise. That's my advise, and I'm a pretty intelligent person, so take it as you will.

Azanon

[bbuzzard]

Originally Posted by Jay_Gatsby

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

I must admit there is probably some truth in this. I worked long and hard to get where I am at, and it seem irrational to throw it all away. My rational mind says I can keep working, spend everything I make plus 4%, and have 3X my current disposable income.

My irrational minds says I would rather spend 50% of what I currently do, and spend all my time hiking in the mountains.

[Nords]

Originally Posted by bbuzzard

This does worry me somewhat, and is part of the reason for considering delaying retirement another 8 years.

As much fun as another eight years in the workplace seems to be, you could at least worry constructively by researching the issue.

You could start by reading this FPA study, keeping in mind that it doesn't evaluate the effect of rising healthcare costs. *Then take a look at ESRBob's book discussion of the 4% SWR, modified for bad years, and Bud Hebeler's alternative system in a library copy of his book.

You could also consider Bloomberg's recent articles noting that retiree spending drops dramatically beginning at age 80. *Most financial planners have commented among themselves that retiree spending drops off when they reach that age and continues to lower slowly (until they die!). *It remains to be seen whether it's because today's 80-year-olds lived through the Depression or if it's a lack of appreciation for the fact that 78 million boomers will rewrite all the spending rules when they reach their 80s.

I can't pretend to be able to tell you the right answer-- only you can evaluate your own situation. *But staying at the job due to a lack of working through a fear (other than by working for another eight years!) sounds like paralysis by analysis.

When I found the Terhorst's book my first thought was "Damn! *Missed it by five years!!" *I hope you don't have a similar epiphany eight years later.

[bbuzzard]

Originally Posted by davew894

Buzzard... why do you want to leave your job? What was your motivation for saving for ER?

As I mentioned, FI was more of a driver than ER, although that was alos a factor. I have many hobbies that I actively participate in, and would love to have more time to spend on them. However, I also worry that if I have 52 weeks a year to hike, kayak, etc, it would not be as much fun as when I only get to do it 4 weeks plus 12 weekeneds.